Paulson group buys into AngloGold

Paulson & Co spent $1.28bn buying Anglo American’s stake in gold miner AngloGold Ashanti on Tuesday as the New York hedge fund moved from betting against banks to betting against governments.

Paulson, founded by billionaire John Paulson, bought 11.3 per cent of the Johannesburg miner as part of its bet that gold benefits as paper currencies suffer from the financial crisis and from governments printing money.

Paulson has become one of the most closely followed hedge fund managers after his bet against subprime mortgages became the most profitable trade in history in 2007, securing profits of more than $10bn for his funds.

Gold is a traditional safe-haven purchase and has become increasingly popular with hedge funds this year as they worry about paper currencies being debased, causing inflation.

The deal comes as a surprise as Anglo American said last month it intended to “remain a significant shareholder in AngloGold Ashanti in the medium term”.

But on Tuesday Anglo American said disposal of the stake to Paulson was consistent with its stated intention to dispose of “this non-core holding”.

Mark Cutifani, AngloGold chief executive, welcomed Paulson as an investor. “As the world deals with the global economic crisis the value of gold, as the only true ‘hard currency’, is coming to the fore, as evidenced by the investment choices of some of the world’s most seasoned investors.” AngloGold was created in 2004 through the merger of Anglo American’s gold mining operations with Ashanti Goldfields Corp.

Paulson said in a statement: “We believe AngloGold is one of the best managed and undervalued of the major global gold mining companies. We look forward to the implementation of their global expansion strategy.”

The deal will help pay down net debts at Anglo American, which stood at about $11bn at the end of 2008. Shares in the company, led by chief executive Cynthia Carroll, traded close to £36 last May during the commodities boom, but have since slumped, and closed down 37p at £11.16 on Tuesday.

Anglo American, a miner of coal, platinum, diamonds, copper and other industrial metals, signalled tougher trading last month as it scrapped dividend payments and announced 19,000 job cuts.

http://www.ft.com/cms/s/0/af0e54aa-132d-11de-a170-0000779fd2ac.html

Is this what all the "smart money" is doing?

Cheers.

 

Sometimes the obvious trade is the right one. Look at housing. If you shorted housing stocks in 2005-2006, you lost your ass for a while, even though that was when the writing was on the wall and that was the obvious trade to take.

Maybe rule of thumb should be 'fundamentals will take 2-3 years to click in'. With that said, who knows what gold will do in the next year or two, but in 2011, we may be at $3000/ounce.